AUDITING PROBLEMS

PROBLEM NO. 1 – AUDIT OF PROPERTY, PLANT, AND EQUIPMENT (PPE)

The TGR Company commenced operations on January 1, 2014. The company’s machinery
account is shown below.

Date Particulars Debit Credit Balance

Jan. 1, 2014 Purchase P157,200
120,000
132,000 P409,200
Sept. 30, 2014 Purchase on installment
Payments from Sept. to Dec. 72,000 481,200
Oct. 3, 2014 Freight and installation 6,000 487,200
Dec. 31, 2014 Depreciation P97,440 389,760
2015 Installment payments for acquisition
on Sept. 30, 2014 144,000 533,760
June 30, 2015 Purchase 240,000 773,760
Dec. 31, 2015 Depreciation 154,752 619,008
June 30, 2016 Acquisition – trade in of old machine 150,000 769,008
Dec. 31, 2016 Depreciation 153,802 615,206
Jan. 1, 2017 Sale 71,250 543,956
Dec. 31, 2017 Depreciation 108,791 435,165
Oct. 1, 2018 Sale 24,000 411,165
Dec. 31, 2018 Depreciation 82,233 328,932

The details of the transactions are as follows:

a) On September 30, 2014, a machine was purchased on an installment basis. The list price
was P180,000, but 12 payments of P18,000 each were made by the company. Only the
monthly payments were recorded in the machinery account starting with September 30, 2014.
Freight and installation charges of P6,000 were paid and charged to the machinery account
on October 3, 2014.

b) On June 30, 2015, a machine was purchased for P240,000, 2/10, n/30, and recorded at
P240,000 when paid for on July 5, 2015.

c) On June 30, 2016, the machine acquired for P157,200 was traded for a larger one having a
list price of P279,000. Allowance of P129,000 was received on the old machine, the balance
of the list price being paid in cash and charged to the machinery account.

d) On January 1, 2017, the machine acquired on January 1, 2014 with cost of P132,000 was sold
for P75,000. The cost of removal and crating totaled P3,750.

e) On October 1, 2018, the machine purchased on January 1, 2014 was sold for P24,000 cash.

Assume a 5-year useful life for TGR Company’s machinery.

 Page 2

1. What is the total amount of gain on the sale/trade-in of the machinery acquired on January
1, 2014?
A. P50,400
B. P40,200
C. P36,450
D. P86,850

2. What is the adjusted balance of the Machinery account on December 31, 2018?
A. P694,200
B. P705,000
C. P700,200
D. P703,950

3. What is the adjusted balance of the Accumulated depreciation account on December 31,
2018?
A. P465,600
B. P457,140
C. P462,240
D. P397,740

4. What is the correct total depreciation provision for the years 2014-2018?
A. P737,400
B. P734,040
C. P728,940
D. P669,540

5. The entry to correct the depreciation provision for the years 2014-2018 should include a
debit (credit) to
Depreciation Expense Retained Earnings
A. P75,807 P61,215
B. (P18,492) P79,707
C. P18,492 (P79,707)
D. P75,807 P55,249
 Page 3

PROBLEM NO. 2 – AUDIT OF CASH

The cash account of NUNAL COMPANY shows the following activities:

Date Debit Credit Balance
Nov. 30 Balance P345,000
Dec. 2 November bank charges P 150 344,850
4 November bank credit for notes
receivable collected P 30,000 374,850
15 NSF check 3,900 370,950
20 Loan proceeds 145,500 516,450
21 December bank charges 180 516,270
31 Cash receipts book 2,121,900 2,638,170
31 Cash disbursements book 1,224,000 1,414,170

CASH BOOKS
RECEIPTS PAYMENTS
Date OR No. Amount Check No. Amount
Dec. 1 110-120 P 33,000 801 P 6,000
2 121-136 63,900 802 9,000
3 137-150 60,000 803 3,000
4 151-165 168,000 804 9,000
5 166-190 117,000 805 36,000
8 191-210 198,000 806 57,000
9 211-232 264,000 807 78,000
10 233-250 231,000 808 90,000
11 251-275 63,000 809 183,000
12 276-300 90,000 810 21,000
15 301-309 165,000 811 24,000
16 310-350 24,000 812 48,000
17 351-390 57,000 813 60,000
18 391-420 27,000 814 66,000
19 421-480 51,000 816 108,000
22 481-500 63,000 817 33,000
23 501-525 96,000 818 150,000
23 - - 819 21,000
23 - - 820 12,000
26 526-555 222,000 821 9,000
28 556-611 15,000 822 36,000
28 - - 823 39,000
29 612-630 114,000 824 87,000
29 - - 825 6,000
29 - - 826 33,000
Totals P2,121,900 P1,224,000
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BANK STATEMENT

Date Check Charges Credits

Dec. 1 792 P 7,500 P 25,500
2 802 9,000 33,000
3 - - 63,900
4 804 9,000 60,000
5 EC 243,000 243,000
8 805 36,000 285,000
9 CM 16 - 36,000
10 799 21,150 462,000
11 DM 57 3.900 231,000
12 808 90,000 63,000
15 803 3,000 -
16 809 183,000 255,000
17 DM 61 180 24,000
18 813 60,000 57,000
19 CM 20 - 145,500
22 815 18,000 -
23 816 108,000 141,000
23 811 24,000 -
23 801 6,000 -
26 814 66,000 96,000
28 818 150,000 222,000
28 DM 112 360 -
29 821 9,000 15,000
29 CM 36 - 36,000
29 820 12,000 -
Totals P1,059,090 P2,493,900

1. DMs 61 and 112 are for service charges.

2. EC is error corrected.
3. DM 57 is for an NSF check.
4. CM 20 is for loan proceeds, net of P450 interest charges for 90 days.
5. CM 16 is for the correction of an erroneous November bank charge.
6. CM 36 is for customers’ notes collected by bank in December.
7. Bank balance on December 31 is P1,776,810
 Page 5

Based on the preceding information, determine the following:

1. Outstanding checks at December 31

A. P459,000
B. P477,000
C. P441,000
D. P487,650

2. Deposit in transit at December 31

A. P114,000
B. P139,500
C. P132,000
D. P0

3. Adjusted bank receipts for the month of December

A. P2,297,400
B. P2,291,400
C. P2,303,400
D. P2,321,400

4. Adjusted book disbursements for the month of December

A. P1,228,440
B. P1,246,440
C. P1,210,440
D. P1,246,620

5. Adjusted bank balance at December 31

A. P1,449,810
B. P1,674,810
C. P1,431,810
D. P1,776,810
 Page 6

PROBLEM NO. 3 – AUDIT OF ACCOUNTS RECEIVABLE (CONFIRMATION)

To substantiate the existence of the accounts receivable balances as at December 31, 2018 of
LUKAS COMPANY, you have decided to send confirmation requests to customers. Below is a
summary of the confirmation replies together with the exceptions and audit findings. Gross profit
on sales is 20%. The company is under the perpetual inventory method.

Name of Balance Comments

Customer Per Books From Customers Audit Findings
Concordia P150,000 P90,000 was returned on December 30, Returned goods were received
2018. Correct balance as is P60,000. December 31, 2018.
Falcon P30,000 Your CM representing price adjustment The CM was taken up by Lukas
dated December 28, 2018 cancels this. Company in 2019.
Lazaro P144,000 You have overpriced us by P150. Correct The complaint is valid.
price should be P300.
Silang P112,500 We received the goods only on January 6, Term is shipping point.
2019. Shipped in 2018.
Yakal P135,000 Balance was offset by our December Lukas Company credited
shipment of your raw materials. accounts payable for
P135,000 to record purchases.
Yakal is a supplier.

1. If the necessary adjusting journal entry is made regarding the case of Concordia, the net
income will
A. Decrease by P18,000. .
B. Decrease by P90,000.
C. Increase by P18,000
D. Increase by P90,000.

2. The effect on 2018 net income of Lukas Company of its failure to record the CM involving
transaction with Falcon:
A. P30,000 over.
B. P30,000 under.
C. P6,000 over.
D. P6,000 under.

3. The overstatement of receivable from Lazaro is

A. P96,000
B. P24,000
C. P72,000
D. P48,000

4. The accounts receivable from Silang is

A. Correctly stated.
B. P112,500 over.
C. P225,000 under.
D. P112,500 under

5. The adjusting entry to correct the receivable from Yakal is

A. Purchases 135,000
Accounts receivable 135,000
B. Accounts payable 135,000
Purchases 135,000
C. Accounts receivable 135,000
Accounts payable 135,000
D. Accounts payable 135,000
Accounts receivable 135,000
 Page 7
PROBLEM NO. 4 – AUDIT OF NOTES RECEIVABLE

The HVR Company included the following in its notes receivable as of December 31, 2018:
Note receivable from sale of land P2,640,000
Note receivable from consultation 3,600,000
Note receivable from sale of equipment 4,800,000

The following transactions during 2018 and other information relate to the company’s notes
receivable:

a) On January 1, 2018, HVR Company sold a tract of land to Triple X Company. The land,
purchased 10 years ago, was carried on HVR’s books at P1,500,000. HVR received a
noninterest-bearing note for P2,640,000 from Triple X. The note is due on December 31,
2019. There was no established exchange price for the land. The prevailing interest rate for
this note on January 1, 2018 was 10%.

b) On January 1, 2018, HVR Company received a 5%, P3,600,000 promissory note in exchange
for the consultation services rendered. The note will mature on December 31, 2020, with
interest receivable every December 31. The fair value of the services rendered is not readily
determinable. The prevailing rate of interest for a note of this type was 10% on January 1,
2018.

c) On January 1, 2018, HVR Company sold an old equipment with a carrying amount of
P4,800,000, receiving P7,200,000 note. The note bears an interest rate of 4% and is to be
repaid in 3 annual installments of P2,400,000 (plus interest on the outstanding balance). HVR
received the first payment on December 31, 2018. There is no established market value for
the equipment. The market interest rate for similar notes was 14% on January 1, 2018.

Note: Round off present value factors to four decimal places and final answers to the nearest
hundred.

1. What amount of consultation fee revenue should be recognized in 2018?

A. P3,600,000
B. P2,705,000
C. P4,047,500
D. P3,152,500

2. What amount should be reported as gain on sale of equipment?

A. P994,800
B. P2,400,000
C. P1,162,700
D. P1,237,300

3. The amount to be reported as noncurrent notes receivable on December 31, 2018 is

A. P7,482,200
B. P6,037,300
C. P5,477,500
D. P7,877,600

4. The amount to be reported as current notes receivable on December 31, 2018 is

A. P4,800,000
B. P2,400,200
C. P4,404,900
D. P7,440,000

5. How much interest income should be recognized in 2018?

A. P974,200
B. P756,000
C. P1,378,700
D. P1,160,500
 Page 8
PROBLEM NO. 5 – AUDIT OF SHAREHOLDERS’ EQUITY

iBELIEVE COMPANY began operations on January 1. Authorized were 120,000 shares of P10 par
value ordinary shares and 240,000 shares of 10%, P100 par value preference shares. The
following transactions involving shareholders’ equity occurred during the first year of operations.

Jan. 1 Issued 30,000 ordinary shares to the corporation promoters in exchange for land valued
at P1,020,000 and services valued at P420,000. The property had cost the promoters
P540,000 3 years before and was carried on the promoters’ books at P300,000.

Feb. 23 Issued 60,000 preference shares with a par value of P100 per share. The shares were
issued at a price of P150 per share, and the company paid P450,000 to an agent for
selling the shares.

Mar. 10 Sold 18,000 ordinary shares for P390 per share. Issue costs were P150,000.

Apr. 10 24,000 ordinary shares were sold under share subscriptions at P450 per share. No
shares are issued until a subscription contract is paid in full. No cash was received.

July 14 Exchanged 4,200 ordinary shares and 8,400 preference shares for a building with a fair
value of P3,060,000. The building was originally purchased for P2,280,000 by the
investors and has a book value of P1,320,000. In addition, 3,600 ordinary shares were
sold for P1,440,000 in cash.

Aug. 3 Received payments in full for half of the share subscriptions and payments on account
on the rest of the subscriptions. Total cash received was P8,400,000. Share certificates
were issued for the subscriptions paid in full.

Dec. 31 Net income for the first year of operations was P3,600,000.

Dec. 31 Declared a cash dividend of P10 per share on preference shares and P20 per share on
ordinary shares, payable on February 10 to shareholders of record on January 15.

Based on the preceding information, calculate the balances of each of the following
accounts:

1. Share premium – preference shares

A. P2,550,000
B. P540,000
C. P3,090,000
D. P3,270,000

3. Ordinary shares
A. P528,000
B. P678,000
C. P366,000
D. P372,000

3. Share premium – ordinary shares

A. P22,242,000
B. P18,660,000
C. P11,520,000
D. P21,432,000

4. Retained earnings
A. P1,320,000
B. P3,600,000
C. P2,100,000
D. P1,740,000

5. Total shareholders’ equity

A. P32,160,000
B. P29,760,000
C. P33,900,000
D. P31,080,000
 Page 9

PROBLEM NO. 6 – AUDIT OF INVESTMENT IN TRADING SECURITIES

Supporting records of MAYON CORPORATION’s trading securities portfolio show the following
debt and equity securities:

Security Cost Fair Value

400 ordinary shares Concave Co. P 254,500 P 243,000
P800,000 Tipo Co. 7% bonds 796,500 774,000
P1,200,000 Turkey Co. 7 ½% bonds 1,207,500 1,218,900
Totals P2,258,500 P2,235,900

Interest dates on the bonds are January 1 and July 1. Mayon Corporation uses the income
approach to record the purchase of bonds with accrued interest. During 2018 and 2019, Mayon
completed the following transactions related to trading securities:

2018
Jan. 1 Received semiannual interest on bonds. Assume that the appropriate adjusting entry
was made on December 31, 2017.
April 1 Sold P600,000 of 7 ½% Turkey bonds at 102 plus accrued interest.
May 21 Received dividend of P1.25 per share on the Concave ordinary share capital. The
dividend had not been recorded on the declaration date.
July 1 Received semiannual interest on bonds and then sold the 7% Tipo bonds at 97 ½.
Aug. 15 Purchased 200 shares of Newman, Inc. ordinary share capital at P580 per share plus
brokerage fees of P500.
Nov. 1 Purchased P500,000 of 8% Toll Co. bonds at 101 plus accrued interest. Brokerage fees
were P1,250. Interest dates are January 1 and July 1.
Dec. 31 Market prices of securities were:
Concave ordinary shares P550
7 ½% Turkey bonds 101 ¾
8% Toll bonds 101
Newman ordinary shares P583.75

2019
Jan. 2 Recorded the receipt of semiannual interest on bonds.
Feb. 1 Sold the remaining 7 ½% Turkey bonds at 101 plus accrued interest.
 Page 10

1. What is the total interest and dividend income for 2018?

A. P125,166
B. P164,416
C. P91,417
D. P98,804

2. What amount should be reported as gain on sale of trading securities in 2018?

A. P2,550
B. P6,000
C. P8,550
D. P3,450

3. What amount of unrealized gain or loss should be reported in the income statement for the
year ended December 31, 2018?
A. P21,200 unrealized gain
B. P21,200 unrealized loss
C. P6,150 unrealized gain
D. P6,150 unrealized loss

4. What is the carrying amount of the remaining trading securities on December 31, 2018?
A. P1,481,000
B. P1,450,450
C. P1,473,450
D. P1,452,250

5. What is the loss on the sale of the remaining Turkey bonds on February 1, 2019?
A. P4,500
B. P10,500
C. P13,500
D. P750
 Page 11

PROBLEM NO. 7 – AUDIT OF INTANGIBLE ASSETS

BANAWE COMPANY began operations on January 2, 2010. Shown below is the company’s trial
balance prepared by its staff accountant for December 31, 2018.
Banawe Company
UNADJUSTED TRIAL BALANCE
December 31, 2018
(in thousands of pesos)
Debit Credit
Cash P 60
Accounts receivable 150
Inventory 360
Equipment 2,400
Accumulated depreciation – Equipment P 750
Buildings 3,600
Accumulated depreciation – Buildings 1,200
Patents 1,650
Franchise agreement 285
Organization costs 306
Goodwill 1,035
Accounts payable 36
Accrued wages payable 15
Accrued taxes payable 180
Bonds payable 1,500
Premium on bonds payable 105
Preference shares (P100 par value) 300
Ordinary shares (P25 par value) 3,300
Premium on share capital 660
Retained earnings (as of January 1) 1,200
Sales 2,700
Cost of goods sold 1,200
Selling and administrative expenses 900
P11,946 P11,946
As a member of the audit team for Banawe Company, you have been assigned the audit of the
company’s intangible assets. Your investigation reveals the following:

Patents
The patents, acquired January 2, 2011, are being amortized over an expected useful life of 14
years. Improvements made to equipment covered by the patents costing P225,000 were debited
to the account in January 2015. Amortization in 2015-2017 included amortization on the
P225,000 for the remaining life of the relevant patent. It is determined that the P225,000 should
have been expensed in 2015. It is further determined on December 31, 2017, that one of the
patents has a remaining life of only 2 years. This patent was originally assigned a cost of
P630,000.

Franchise Agreement
A franchise agreement was signed on January 1, 2018. A P150,000 fee was paid, covering a 5-
year period, at the end of which the company may renew the agreement by paying P150,000. A
decision on renewal has not been made as of December 31, 2018. The agreement calls for an
annual payment of 5% of revenue. An entry debiting the account for P135,000 was made at the
time of the cash payment for 2018.

Organization Costs
Organization costs include the unamortized portion of amounts paid to promote for services
rendered at the inception of the corporation. These fees have been amortized, since inception,
over an estimated 40-year life. The decision is made, as of December 31, 2018, to reduce the
total period of amortization of organization costs to 12 years.
 Page 12

Goodwill
The goodwill account includes the following:
P135,000 -- Legal expenses relative to incorporation. These were assigned to the account in
January 2010.
P600,000 -- Excess of cost over assigned net asset values of an enterprise acquired in early
2016 expected to be of value for an indefinite period.
P300,000 -- Paid to an advertising consulting firm in early 2017 for a major advertising effort
expected to be beneficial for an indefinite period.

No amortization has been taken on any amount in the Goodwill account.

1. What is the carrying value of the Patents on December 31, 2018?

A. P1,211,786
B. P1,009,286
C. P1,166,786
D. P1,256,786

2. What is the carrying value of the Franchise Agreement on December 31, 2018?
A. P120,000
B. P228,000
C. P123,000
D. P112,500

3. What is the carrying value of the Organization Costs on December 31, 2018?
A. P171,000
B. P0
C. C.P417,375
D. P194,625

4. What is the carrying value of Goodwill on December 31, 2018?

A. P1,035,000
B. P585,000
C. P1,009,125
D. P600,000

5. What is the total Patent amortization for 2018?

A. P370,714
B. P168,214
C. P315,000
D. P325,714
 Page 13

PROBLEM NO. 8 – COMPUTATION OF CASH SHORTAGE

You have been asked by the proprietor of the SANDOVAL CO. to verify the accountability of the
cashier-bookkeeper, who was allowed to take a vacation leave a few days ago.

A. The bank reconciliation statements prepared by the cashier-bookkeeper are presented below:
November 30, 2018
Balance per bank statement P21,500
Cash on hand 500
Total 22,000
Outstanding checks:
No. 2520 P 2,000
2521 1,400
2522 1,900 (3,300)
Erroneous bank charge 2,000
Erroneous bank credit (500)
Book balance P20,200

December 31, 2018

Balance per bank statement P 135,000
Cash on hand 6,300
Total 141,300
Outstanding checks:
No. 2674 P31,000
2675 10,300
2676 5,000 (41,300)
Erroneous bank charge 3,000
Erroneous bank credit (600)
Book balance P102,400

B. The Cash in Bank account in the general ledger shows the following debits and credits during
December:

Cash in Bank
Dec. Dec.
1 Balance P20,200 1 Checks issued P2,000
2 Received from customers 4,500 5 Checks issued 5,200
7 Received from customers 5,000 14 Checks issued 31,000
12 Received from customers 20,000 24 Checks issued 46,000
17 Received from customers 30,000 28 Checks issued 7,600
23 Received from customers 9,000
27 Received from customers 70,000
31 Received from customers 48,500 31 Balance 102,400
Total P198,200 Total P198,200
 Page 14

C. The following summarized transactions were taken from the bank statement for the month of
December 2018:

Balance, December 1, 2018 P16,500

Total deposits P173,700
The total deposits per bank statement include:
a. Collection of notes receivable P5,000
b. Correction of November erroneous bank charge 2,000
c. December 10 deposit of Lava, Inc. credited in error
to SANDOVAL 600
Total P7,600
Total checks P65,200
The total checks per bank statement include:
a. Correction of November erroneous bank credit P 500
b. December check of Nile Co. charged in error
to SANDOVAL 3,000
Total P3,500

D. Cash on hand per count in the morning of January 2, 2019, amounted to P6,300.

E. Before leaving his company for a one-week vacation, the proprietor had left several signed
blank checks that the cashier-bookkeeper had cashed for his personal use.

1. What is the adjusted cash balance on November 30, 2018?

A. P16,500
B. P13,200
C. P20,200
D. P14,500

2. The amount of unaccounted receipts in December is

A. P11,000
B. P13,200
C. P9,000
D. P15,100

3. The amount of unrecorded/unsupported disbursements in December is

A. P15,100
B. P10,900
C. P7,000
D. P5,000

4. What is the total cash shortage as of December 31, 2018?

A. P26,000
B. P15,100
C. P33,000
D. P7,000

5. What is the adjusted cash balance on December 31, 2018?

A. P102,400
B. P125,000
C. P87,400
D. P111,400
 Page 15

PROBLEM NO. 9 – AUDIT OF INVENTORIES

The cost of goods sold section of the income statement prepared by your client for the year ended
December 31 appears as follows:

Inventory, January 1 P 240,000

Purchases 4,800,000
Cost of goods available for sale P5,040,000
Inventory, December 31 300,000
Cost of goods sold P4,740,000

Although the books have been closed, your working paper trial balance is prepared showing all
accounts with activity during the year. This is the first time your firm has made an examination.

The January 1 and December 31 inventories appearing above were determined by physical count
of the goods on hand on those dates and no reconciling items were considered. All purchases
are FOB shipping point.

In the course of your examination of the inventory cutoff, both at the beginning and end of the
year, you discovered the following facts:

Beginning of the Year

1. Invoices totaling P75,000 were entered in the voucher register in January, but the goods were
received during December.

2. December invoices totaling P39,600 were entered in the voucher register in December, but
the goods were not received until January.

End of the Year

3. Sales of P129,000 (cost of P38,700) were made on account on December 31 and the goods
delivered at that time, but all entries relating to the sales were made on January 2.

4. Invoices totaling P45,000 were entered in the voucher register in January, but the goods were
received in December.

5. December invoices totaling P54,000 were entered in the voucher register in December, but
the goods were not received until January.

6. Invoices totaling P36,000 were entered in the voucher register in January, and the goods
were received in January, but the invoices were dated December.
 Page 16

1. What working paper adjustment should be made at the end of the current year for item no.
1?
A. Purchases 75,000
Retained earnings 75,000
B. Retained earnings 75,000
Purchases 75,000
C. Inventory, beginning 75,000
Purchases 75,000
D. No adjusting entry is necessary.

2. The working paper adjustment to correct the error described in item no. 3 should include a
debit to
A. Accounts receivable of P129,000
B. Sales of P129,000
C. Inventory of P38,700
D. Retained earnings of P90,300

3. The company’s statement of financial position as of the end of the current year should show
inventory of
A. P390,000
B. P300,000
C. P279,600
D. P351,300

4. What is the net adjustment to purchases of the current year?

A. P81,000 increase
B. P75,000 decrease
C. P6,000 increase
D. P6,000 decrease

5. The cost of goods sold for the current year is

A. P4,683,600
B. P4,659,600
C. P4,740,000
D. P4,695,600
 Page 17

PROBLEM NO. 10 – AUDIT OF VARIOUS WORKING CAPITAL ACCOUNTS

The following accounts were included in the unadjusted trial balance of BUNCHING COMPANY as
of December 31, 2018:

Cash ................................................................................... P 963,200

Accounts receivable ............................................................... 2,254,000
Inventory ............................................................................. 6,050,000
Accounts payable .................................................................. 4,201,000
Accrued expenses .................................................................... 431,000

During your audit, you noted that Bunching Company held its cash books open after year-end.
In addition, your audit revealed the following:

1. Receipts for January 2019 of P654,600 were recorded in the December 2018 cash receipts
book. The receipts of P360,100 represent cash sales and P294,500 represent collections from
customers, net of 5% cash discounts.

2. Accounts payable of P372,400 was paid in January 2019. The payments, on which discounts
of P12,400 were taken, were included in the December 2018 check register.

3. Merchandise inventory is valued at P6,050,000 prior to any adjustments. The following

information has been found relating to certain inventory transactions:

a. The invoice for goods costing P175,000 was received and recorded as a purchase on
December 31, 2018. The related goods, shipped FOB destination, were received on
January 4, 2019, and thus were not included in the physical inventory.

b. A P182,000 shipment of goods to a customer on December 30, 2018, terms FOB

destination, are not included in the year-end inventory. The goods cost P130,000 and
were delivered to the customer on January 3, 2019. The sale was properly recorded in
2019.

c. Goods costing P637,500 were shipped on December 31, 2018, and were delivered to the
customer on January 3, 2019. The terms of the invoice were FOB shipping point. The
goods were included in the 2018 ending inventory even though the sale was recorded in
2018.

d. Goods costing P217,500 were received from a vendor on January 4, 2019. The related
invoice was received and recorded on January 6, 2019. The goods were shipped on
December 31, 2018, terms FOB shipping point.

e. Goods valued at P275,000 are on consignment with a customer. These goods are not
included in the inventory figure.

f. Goods valued at P612,800 are on consignment from a vendor. These goods are not
included in the physical inventory.
 Page 18

Based on the above and the result of your audit, determine the adjusted balances of the following
as of December 31, 2018:

1. Cash
A. P963,200
B. P681,000
C. P668,600
D. P693,400

2. Accounts receivable
A. P2,908,600
B. P2,564,000
C. P2,254,000
D. P2,548,500

3. Inventory
A. P6,035,000
B. P6,080,000
C. P5,860,000
D. P5,010,000

4. Accounts payable
A. P4,790,900
B. P4,615,900
C. P4,573,000
D. P4,603,500

5. Current ratio
A. 2.00
B. 1.83
C. 1.84
D. 2.01

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